Cathay Pacific Airways, arguably one of the best-run airlines in the world, is unlikely to have escaped unscathed from a challenging first half for airlines and could see its net profit dip into the red, warned one analyst.

'Cathay is one of the best-managed airlines in Asia-Pacific but even so, it cannot dodge the bullets of stubbornly high jet kerosene prices and falling passenger fares,' noted a report from Credit Suisse last week.

Also likely to have weighed on the airline's bottom line, said analysts, was weak cargo demand.

The airline will unveil its interim result on Wednesday, and analysts have forecast it may barely break even and could dip into a marginal loss for the period, compared with a net profit of HK$2.8 million last year.

Credit Suisse estimated Cathay would report core earnings of HK$125 million. But after accounting for impairment provisions on aircraft sale, it could report a bottom-line loss of as much as HK$460 million.

But analysts' consensus expectation was a net profit of HK$443 million, which would nonetheless be down 85 per cent from last year.

Cathay projected in May that its interim result would be disappointing in light of high oil price, sluggish cargo business and pressure on economy-class yields. Three months on, and oil prices had dropped to US$80 per barrel towards the end of June from a peak of US$110 in March. Still, averaged over the first half, they would be flat year on year.

But pressure on cargo yields has been rising. In the first half, the carrier flew 14.3 million passengers, up 8.6 per cent from a year earlier. But cargo tonnage continued to be battered by the weak global economy, down 9.8 per cent to 754,000 tonnes.

Although passenger volumes and the percentage of seats filled continued to climb, this came at the expense of yield deteriorations. The passenger yield, a measure of revenues per seat, was down in all classes in June, Cathay said last month.

The cargo sector was even worse off as there was no uptick in demand out of Hong Kong and the mainland in June. Although the fall was milder from the previous months in 2012, that was partially due to the already low bases of comparison last year.

In May, the cargo load factor, or the percentage of cargo space filled, plunged to a record low 62.3 per cent, the lowest level since 1996, a UBS report said. The losses incurred in the cargo venture with Air China also added to the carrier's woes. The joint venture is expected to have lost 500 million yuan (HK$608 million) in the first quarter as demand from Europe and the United States waned.

Cost control, meanwhile, had been a challenge, said analysts, since jet fuel prices remained high.

Cathay needs to write off nine older B747-400 aircraft, which are poised to be offloaded in the market, and the high oil price environment will make the oil-thirsty aircraft depreciate more sharply.

The first half of 2012 was expected to be the third sequential half where operating earnings fell more than 65 per cent and results were expected to be compounded below the line, Credit Suisse said.